TY - JOUR
T1 - Which factor model?
T2 - A systematic return covariation perspective
AU - Ahmed, Shamim
AU - Bu, Ziwen
AU - Symeonidis, Lazaros
AU - Tsvetanov, Daniel
N1 - Crown Copyright © 2023 Published by Elsevier Ltd. All rights reserved.
PY - 2023/9
Y1 - 2023/9
N2 - We examine which factor model best captures systematic return covariation by focusing on the economic implications for portfolio risk control. The pairwise variance equality test and the model confidence set procedure suggest that the Fama and French (2015) five-factor model, the Barillas and Shanken (2018) six-factor model, and the Fama and French (2018) six-factor model are the top performers for the factor model-implied minimum risk portfolios in the out-of-sample. When it comes to the minimum tracking error portfolios, the Barillas and Shanken (2018) six-factor model and the Fama and French (2018) six-factor model are the overall winners in the horse race.
AB - We examine which factor model best captures systematic return covariation by focusing on the economic implications for portfolio risk control. The pairwise variance equality test and the model confidence set procedure suggest that the Fama and French (2015) five-factor model, the Barillas and Shanken (2018) six-factor model, and the Fama and French (2018) six-factor model are the top performers for the factor model-implied minimum risk portfolios in the out-of-sample. When it comes to the minimum tracking error portfolios, the Barillas and Shanken (2018) six-factor model and the Fama and French (2018) six-factor model are the overall winners in the horse race.
U2 - 10.1016/j.jimonfin.2023.102865
DO - 10.1016/j.jimonfin.2023.102865
M3 - Article
SN - 0261-5606
VL - 136
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
M1 - 102865
ER -